Five Questions About the Stimulus

Now that a group of economists, including well-known Marxists Martin Feldstein and Larry Lindsey, have recommended that the stimulus package reach in the neighborhood of $1 trillion (with a “t”) dollars, a few questions come to mind:

Who will run it? Conceivably, the stimulus “package” could actually be a series of discrete pieces, but there is still going to need to be someone with whom the buck stops who is not the President. When FDR put together the Works Progress Administration, after some initial bickering, he settled on Harry Hopkins. He was both smart and lucky. Hopkins was not only an enormously talented administrator, but also politically tough (although not always popular) and clean as a whistle. That’s a hard combination to find.

This might explain why Obama has not yet named his Secretary of Labor. DOL has traditionally been in the forefront of advocating for jobs programs, from Frances Perkins during the 30’s to Willard Wirtz in the 60’s. (One of the great tragedies of US political history was that LBJ rejected Wirtz’ advice to make the antipoverty program a jobs program like the WPA; instead, we got Community Action, which trained future political leaders but little else. For details, see this.) This might also be why many people’s favorite, Mary Beth Maxwell, has not been named. Maxwell is a formidable advocate, but might not be able to run a program like this. (Or it could just be because as a workers’ advocate she wants, you know, better pay for workers.).

How to balance immediate job creation with long-term capital appreciation? The government could put people to work quickly, and get money into the economy, creating a spending-driven Keynesian stimulus. Or alternatively, it could spend it on capital projects that take longer to get through the pipeline but will provide greater capital development benefits.

Note also that there might be something of a class implication in this. The sorts of people who will be the most valuable in designing, planning, executing, and building the next generation of capital projects (say, green infrastructure) could be more highly skilled than those who need jobs now. There is also the environmental angle: it’s much easier and quicker to repair roads than design, permit, and build green high-speed rail.

What will people get paid? Lurking around any government jobs programs is the issue of pay scales, and particularly, the Davis-Bacon Act, which requires jobs to pay prevailing wages. Obviously, you can hire more people if you don’t pay prevailing wage, and if what you are trying to is get wages spent, then the higher you go, the less that is true. On the other hand, the scale of this stimulus might be so big that you can afford the whole thing. And of course, higher paying jobs will also mean a stronger middle class, and it’s not as if middle-class workers starting to save money is a bad thing.

How to insulate against corruption, cronyism and insider things, without hamstringing procurement process? Throughout the WPA’s history, Republicans complained with no factual basis (some things never change) that the program was designed to give jobs to help out Democratic politicians. But this is an occupational hazard of jobs programs. Who gets the jobs and the contracts?

Note that the toughest anti-corruption rules can actually harm the effectiveness of the program. As Harvard’s Steve Kelman demonstrated in his wonderful book on the topic, anti-cronyism rules often make things worse, because if you give bidders credit based upon previous performance, then you wind up with a small group of insiders. So then you don’t. But then, the contractors have no incentive for good performance, because they won’t be rewarded for it.

And finally–how do answer these questions with the requisite care while at the same time getting something quickly enough on the President’s desk?strong>

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.